When you file Chapter 7 bankruptcy, federal exemptions let you keep up to $31,575 in home equity, $5,025 in vehicle equity, $16,850 in household goods (capped at $800 per item), $1,711,975 in IRA balances, and unlimited amounts in ERISA-qualified retirement plans, along with smaller categories for tools of your trade, life insurance, personal injury awards, and public benefits. Those figures come from the federal exemption schedule effective April 1, 2025 through April 1, 2028. What’s exempt in Chapter 7 bankruptcy depends on which list applies to you, because your state may require you to use its own exemptions instead of the federal ones.
How Exemptions Fit Into a Chapter 7 Case
The moment you file, almost everything you own becomes part of a legal entity called the bankruptcy estate. That includes your house, your car, cash, tax refunds from prior years, pending lawsuit claims, intellectual property, and even inheritances you become entitled to within 180 days after filing. A court-appointed trustee reviews the estate, applies your exemptions, and sells whatever is left over to pay creditors.
Most Chapter 7 cases end as “no-asset” cases, meaning the trustee finds nothing worth pursuing once exemptions are applied. Whether your case lands there depends on claiming every exemption you’re entitled to on your schedules. Miss one, and the trustee can take property you could have kept.
Federal Exemptions or State Exemptions
Under 11 U.S.C. § 522, each state decides whether its residents may use the federal exemption list or must use the state’s own. Roughly 32 states have opted out, so filers there are locked into state exemptions regardless of whether the federal list would protect more. In the remaining states, you compare the two and pick whichever shields more of your property.
You cannot mix. Pick one complete set of exemptions for the whole case; the federal homestead paired with a state vehicle exemption is not allowed. Married couples filing jointly must use the same system, but each spouse claims a full set, which effectively doubles the caps.
Residency Rules
Which state’s exemptions you can use depends on where you’ve lived. You must use the exemptions of the state where you’ve been domiciled for the 730 days before filing. If you moved during that window, use the state where you lived for the majority of the 180 days before that 730-day period began. If the formula leaves you without any state’s exemptions, you can fall back on the federal list even if your current state has opted out.
Homestead: Protecting Your Home
The federal homestead exemption under § 522(d)(1) shields up to $31,575 in equity in your primary residence. Equity is what counts, not the sale price. If your home is worth $250,000 and you owe $230,000 on the mortgage, your $20,000 in equity fits inside the cap and the trustee cannot touch it.
Many state homestead exemptions are far larger than the federal figure, and a handful of states offer unlimited protection. That is a major reason the state-versus-federal choice matters. Some states protect less than the federal amount, which cuts the other way where the federal option is available.
One important limit: if you bought your home within 1,215 days (about 3.3 years) before filing and you’re using state exemptions, federal law caps the homestead at $214,000 regardless of how generous the state exemption is. The cap targets equity acquired during that window, not equity rolled over from a prior home in the same state.
Vehicles, Household Goods, and Work Tools
The federal motor vehicle exemption under § 522(d)(2) covers up to $5,025 in equity in one vehicle. A car worth $12,000 with a $10,000 loan balance has only $2,000 in equity, well within the cap. A vehicle with negative equity — where you owe more than it’s worth — has no equity for the trustee to reach.
Household goods (furniture, appliances, clothing, books) are protected under § 522(d)(3) up to $800 per item and $16,850 in total. Values are current resale, not what you originally paid. A sofa that cost $2,000 five years ago may sell for $200 today, and that lower number is what counts. Trustees rarely bother with used household goods because the recovery almost never justifies the effort.
If you use specialized equipment for work, § 522(d)(6) protects up to $3,175 in tools, instruments, and books of your trade. That reaches a mechanic’s tools, a photographer’s cameras, and anything similar you need to earn a living.
The Wildcard Exemption
Section 522(d)(5) gives you $1,675 that you can apply to any property at all: cash in the bank, a tax refund, jewelry, anything. If you don’t use your full homestead exemption, or don’t own a home, you can redirect up to $15,800 of that unused homestead amount into the wildcard.
For renters, that pushes the effective wildcard to $17,475. Married couples filing jointly can each claim it, potentially shielding close to $35,000 in property that would otherwise have no home in the exemption list.
Retirement Accounts
Retirement savings get some of the strongest protection available. Employer-sponsored plans that qualify under ERISA (401(k)s, 403(b)s, pensions, profit-sharing plans) are fully exempt with no dollar limit. These funds are actually excluded from the estate rather than merely exempted. SEP and SIMPLE IRAs funded by employer contributions receive similar unlimited protection.
Traditional and Roth IRAs are protected up to $1,711,975, and amounts rolled over from an employer plan don’t count against that cap. A court can raise the ceiling in unusual circumstances, though that’s uncommon.
Inherited IRAs Are Not Exempt
An IRA you inherited from someone other than your spouse gets no bankruptcy protection at all. In Clark v. Rameker (2014) the Supreme Court held that inherited IRAs aren’t “retirement funds” because the holder can withdraw the entire balance at any time, cannot make new contributions, and must take required distributions regardless of age. The full balance is available to the trustee.
Life Insurance, Injury Awards, and Public Benefits
Unmatured life insurance policies you own are fully exempt under § 522(d)(7) with no cap, provided they aren’t credit life insurance. The cash value component of a whole life policy is separately protected under § 522(d)(8) up to $16,850 in accrued dividends, interest, or loan value.
A pending or settled personal injury claim is exempt up to $31,575 under § 522(d)(11)(D). That covers compensation for your own bodily harm, not pain-and-suffering damages you might owe someone else. Wrongful death benefits and crime victim restitution are protected under the same subsection with no dollar cap.
Social Security payments, veterans’ benefits, unemployment compensation, and public assistance are exempt under § 522(d)(10), with no dollar limit. The protection covers both the ongoing income and money sitting in your bank account, as long as you can trace it back to the benefit source. Disability benefits, whether from Social Security or a private policy replacing lost future earnings, receive the same treatment.
Property You Acquire After Filing
The estate doesn’t close on filing day. If you become entitled to an inheritance, a life insurance payout, or a divorce settlement within 180 days after your petition date, that property is pulled into the estate. For inheritances, the trigger is the date of death, not the date you receive the money. If a relative dies 170 days after you file, the inheritance belongs to the estate even if probate takes another two years to close.
You can still apply your exemptions to after-acquired property, but anything above the caps goes to creditors. Filing timing matters if you know a bequest is on the horizon.
What the Trustee Can Still Take
Anything that exceeds your exemption limits, or falls outside any exemption category, is available to the trustee. Common targets include boats, vacation homes, valuable collections, recreational vehicles, and large brokerage account balances. A second home has no exemption category at all; the homestead reaches only your primary residence.
In practice, trustees weigh the cost of seizing and selling an asset against the likely recovery. If non-exempt equity in an item comes to only a few hundred dollars, the trustee may abandon the property back to you under 11 U.S.C. § 554. That happens more often than filers expect, though it’s not something to count on.
Hiding assets is not an option. Concealing property from the trustee is a federal crime under 18 U.S.C. § 152, carrying up to five years in prison. Trustees are experienced at finding undisclosed accounts, recent transfers, and undervalued property.
Keeping Property That Secures a Loan
An exemption protects your equity from the trustee. It does not eliminate the lender’s lien. If you want to keep a car or house with a loan attached, you have three options.
Reaffirmation is a new contract where you remain personally liable on the debt in exchange for keeping the collateral. Payments continue as before, but you lose the discharge protection for that debt. If you later default, the lender can repossess and sue for the deficiency. Reaffirmation agreements must be filed before discharge, and you have 60 days after filing to rescind.
Redemption under 11 U.S.C. § 722 lets you keep personal property (not real estate) by paying the lender the current value of the collateral in a lump sum, even if the loan balance is higher. A car with a $15,000 balance but only $8,000 in value can be redeemed for $8,000. The obstacle is finding the cash during bankruptcy, though specialty lenders do offer redemption financing.
Surrender is the third option. You give the collateral back, the discharge wipes out any remaining balance, and you walk away. For underwater property or items you no longer want, surrender is often the cleanest choice.